Gold fell on Thursday as the widening conflict in the Middle East pushed oil prices higher for a fourth consecutive session, reviving inflation concerns and dimming hopes that the US Federal Reserve might ease interest rates.
Spot gold dropped 0.6 percent to $4,034.42 per ounce by 03:49 GMT. US August gold futures fell 0.3 percent to $4,039.90.
“Gold prices are falling as escalating attacks in the Middle East continue to push oil prices sharply higher this week, keeping inflation concerns alive,” said Jigar Trivedi, a research analyst at IndusInd Securities.
The backdrop is a conflict that intensified after the United States launched two waves of strikes on Iranian coastal missile and defence positions following the reinstatement of a naval blockade on Iranian ports. Trivedi noted that June inflation data does not yet capture the impact of the latest escalation. “The temporary peace deal reached last month has effectively collapsed,” he said.
US consumer and producer price inflation did slow in June, helped by lower energy costs, pointing to a cooling trend before the most recent flare-up. But the figures were not enough to convince markets that the Fed would hold rates steady for the rest of the year.
CME Group’s FedWatch tool showed traders pricing in a 73 percent probability of a Fed rate hike in December. Fed Chair Kevin Warsh reaffirmed his commitment to bringing inflation down without specifying how he intended to do so.
Other precious metals also fell. Silver dropped 1.1 percent to $57.14 per ounce, platinum slipped 0.6 percent to $1,664, and palladium eased 0.3 percent to $1,309.86.
